According to the Internal Revenue Code (IRC) Section 1031, if you exchange like-kind real estate property in the open market and follow certain IRS guidelines, you can avoid a capital gains tax on such sale. IRC 1031 Exchange is how these types of transactions are commonly known as in the United States. Certain conditions need to be followed though. The first condition is that there should be an exchange of two real estates. This means that the person selling must also buy another without much delay. This is the main reason why adhering to the time deadlines becomes important for availing the benefits under this scheme. The IRS has given only two time deadlines. The first deadline specifies that within 45 days of completing or closing the sale of the old property, the new property must be at least identified. The exchanging party has the leverage here of short listing a minimum of three prospective replacement properties. The second deadline states that within 180 days of the sale closure of the old property, the purchase of the new property must also be closed. Only if these two time deadlines are followed, your transaction will qualify as an exchange under the provisions of the code. The second condition stated by the IRS is that the two estates that are exchanged must be of a like-kind. Now, like-kind here refers to the usage of the properties and not its grade and quality, or any valuable modifications applied to it. Therefore, any real estate used only for business, trade or investment purposes can be exchanged with each other. Business or trade means any kind of productive activity such as manufacturing, trading, merchandising, etc. Even if a property, including apartments, has been used only for renting out to tenants you can apply for a tax deferral under the provisions of IRC 1031. However, care must be taken as to not use such property for personal residential purposes. Investment according to the IRC means for speculative reasons. Therefore, properties, including barren lands, purchased with the sole aim of reselling it at higher prices in the future, qualify for a differential treatment under Section 1031. Further more, you can purchase more than one property if you want. The only condition is that both should be like-kind, as described above, and all the proceeds from the sale must be utilized to buy the replacements. Amount left, if any, qualify for a capital gains tax. Properties used for residential purposes and dealer properties do not qualify. Similarly, properties that are not real estates such as inventory, bonds, notes, stocks, securities, debentures, etc. also are excluded from its purview. Last but not least, IRC 1031 Exchange can be facilitated only by an approved intermediary. Hence, you have to enter into a time-bound contract with a third party who can facilitate your exchange.